Suppliers Under the Gun on Quality Standards : Manufacturing: To compete with the Japanese and others, big American companies have had to develop ways to ensure that their products are reliable. Many now demand that firms that sell to them do the same.

SCHAUMBURG, ILL.

At 9 a.m. sharp on a blustery fall morning, about 150 of Motorola Inc.’s suppliers, from furniture makers to sophisticated electronic equipment manufacturers, sat shoulder to shoulder in the company’s auditorium, taking a lesson on quality.

They were following orders from Motorola to go through the rigors of applying for the Baldrige award, the nation’s top prize for quality issued by the Commerce Department each year.

Motorola knows what it takes to get the award, having won it last year. So, it figured, what better way to upgrade the products of its 6,000 suppliers than to put them through the process too?

Those that go along with the program can count on continued business. Suppliers that decide not to apply get cut on Dec. 31.

“Our initial response was, ‘Who do they think they are?’ ” said Phillip Reger, director of quality assurance for Mayville Metal Products, a longtime Motorola supplier, who was taking a coffee break between sessions.

The Wisconsin-based Mayville Metal company later saw the sense of applying for the award, despite the cost and effort involved, because it would give it the direction it needed to improve its own quality.

Motorola is not alone in its get-tough attitude toward suppliers. International Business Machines Corp., like Motorola, is also expecting its suppliers to meet the stiff criteria of the Baldrige award.

As of January, all of Ford Motor Co.’s suppliers--if they want any new business--will be expected to meet the auto company’s tough quality standards that insist suppliers be able to prevent defects with sophisticated statistical tools and other methods. By the fall of 1991, even those with ongoing contracts will have to score high enough on various measures of quality to keep the business.

“The suppliers who are left . . . recognize the same thing we do,” said Leon Piecuch, director of supply policy and planning at Ford. “You really don’t have a choice. If you aren’t (a) high-quality, low-cost producer, your chances for survival are getting minimal.”

This push for quality is forcing revolutionary changes in supplier relationships that have been formed over decades. Prodded by the gains the Japanese have made on the quality front, many major American manufacturers are knee-deep into cures for their own quality problems. And the bitter medicine they are taking, they expect their suppliers to take too.

New Partnerships

In some cases, new partnerships are slowly emerging that offer far more security and stability than those of years past. While companies are demanding more from suppliers, the best ones are offering them a means to get better: training in new manufacturing and quality techniques, consultations on their progress and regular evaluations or “score cards.”

“We are slowly moving away from one-night stands and adversarial relationships,” said Dennis Hiser, corporate director of procurement for Texas Instruments Inc. “But there is still a lot of history we have to overcome.”

Often, suppliers are asked to get involved in the design process early on so that manufacturing glitches are avoided later. Strategic information on the direction and future of a company that used to be considered strictly confidential now is being shared with favored suppliers. The payoff for the effort suppliers put into the relationship is more business.

Donald Pais, General Motors Corp. vice president of materials management, said suppliers who make the grade get the benefit of being the only supplier for a particular part, a practice that was taboo not too long ago.

What has made such close relationships possible is a dramatic paring of the number of suppliers that manufacturers use. Those that make the cut are often trusted to the point where their parts go right into the production process, rather than stopping on the dock for an inspection.

“Our goal is to do business with a few good suppliers,” said Jerry Lenk, vice president of quality for Pitney Bowes business systems. To that end, the company, which has an extensive supplier involvement program, intends to cut its stable of 800 suppliers in half in the next four years.

Xerox Corp. has gone from choosing among 5,000 suppliers to a mere 425. Stephen L. Tierney, vice president of materials management, said the list was trimmed by looking at not only such factors as quality, price and delivery times, but also the “attitude of their management team.”

To get suppliers going in the same direction, Xerox does extensive free training--often with every person in the company--on essentials such as tracking progress on eliminating defective parts, narrowing the time between when an order comes in and when it is shipped, and comparing their progress, or “benchmarking,” against other companies.

Behavioral Change

Motorola has concentrated on behavioral change--motivate and reward rather than threaten and punish. “We want them to speak Motorola-ese,” said Ed Bales, Motorola’s director of design and distribution of training.

Ken Stork, the company’s director of materials and purchasing, spends about 40% of his time visiting suppliers in their plants, acting as a “confidential consultant,” as he calls it.

At a plant that makes capacitors for Motorola, Stork was pleased to see the company was using statistical process control to chart certain manufacturing procedures, but was dismayed to find employees did not know how to read the charts. Stork returned in six months, and the operators were prepared to give him a lesson in statistical process control.

All of this is a far cry from the old days when cost was the only factor that carried any weight. Companies shopping for a supplier opened a bidding process and typically shopped on price alone. When the parts finally showed up, it was assumed some would be bad, and some that were bad would slip through.

“In the past . . . the companies would try to buy at the lowest possible cost, and the supplier would try to find any way to get the material through an incoming inspection,” Lenk said.

Although 60% of Motorola’s suppliers have agreed to the new standards, a few are protesting.

One of them is American Micro Products Inc., a high-precision manufacturer of machine components in Cincinnati. “I say you people are crazy,” said Pierre Paroz, vice president of American Micro Products. “I don’t need that award to make this company successful. I already supply a high-precision, quality part.”

Paroz objects to the costs associated with the quality programs, claiming they add unnecessary expense.

“It’s more documentation and inspection frequency. It means hiring more people. It means storing and retrieving more information,” Paroz complained. “They say this will save you money. Maybe in the long term, but up front, people have to buy the hardware and the software. And it wouldn’t change our quality level, to be honest with you.”

Such complaints aren’t likely to discourage manufacturers from raising the bar on performance ever higher for themselves and their suppliers. Ironically, what may make the demands seem more realistic is that the growing Japanese presence in the United States may stiffen the standards of quality.

Reger of Mayville Metal Products, which is a supplier to the Japanese, said, “I haven’t seen an American company yet that approaches what we see with the Japanese.”